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Crypto Tax and Legal Status in India 2026: What Every Investor Must Know
By Ankit Sharma · Last reviewed: June 2026
ⓘ Disclaimer: This guide is for general informational purposes only and does not constitute legal or financial advice. Please consult a qualified Chartered Accountant (CA) or legal advisor for advice specific to your situation. Crypto assets are high-risk and unregulated.
Cryptocurrency in India occupies a clearly defined but tightly regulated space. As of 2026, trading and holding crypto is not illegal for Indian residents — but it is subject to some of the highest tax rates on investment income in the world: a flat 30% on gains with no deduction for losses.
The regulatory framework was set by the Finance Act 2022 and subsequent CBDT circulars. Understanding these rules matters before you invest: the 1% TDS deducted at source on qualifying transactions, the mandatory Schedule VDA filing in your ITR, and the FIU-IND registration requirements for exchanges all affect how you report — and how much you actually keep.
⚠ Affiliate Disclosure: The platforms below contain affiliate links. We may earn a commission at no extra cost to you. Not financial advice — DYOR.
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Is Crypto Legal in India?
Yes — holding, buying, and selling cryptocurrency is legal in India for individual residents. There is no law prohibiting ownership of digital assets.
Virtual Digital Assets (VDA) — Statutory Definition
The Finance Act 2022 inserted Section 2(47A) into the Income Tax Act 1961, formally defining "Virtual Digital Asset." The definition covers any information, code, number, or token generated through cryptographic means or otherwise, including Bitcoin, Ether, and other cryptocurrencies, as well as non-fungible tokens (NFTs). This definition brought crypto firmly within the Indian tax framework for the first time.
RBI Position
The Reserve Bank of India does not recognise cryptocurrency as legal tender and has repeatedly flagged systemic risks. However, its 2018 circular directing banks to cut services to crypto entities was struck down by the Supreme Court in March 2020 (Internet and Mobile Association of India v. RBI). Banks may currently provide services to crypto exchanges and their customers. RBI has issued no blanket prohibition since.
PMLA and FIU-IND Registration
From March 2023, crypto exchanges and Virtual Asset Service Providers (VASPs) operating in India must register with the Financial Intelligence Unit — India (FIU-IND) under the Prevention of Money Laundering Act (PMLA). This means compliant exchanges perform KYC and report suspicious transactions — which also creates a verifiable trail of your activity for the Income Tax Department.
What Remains Restricted
Crypto is not legal tender; businesses are not obligated to accept it as payment. The proposed Cryptocurrency and Regulation of Official Digital Currency Bill has not been enacted as of 2026. No blanket ban exists, but the regulatory environment can change — investors should monitor Ministry of Finance announcements.
Crypto Tax Rules in India 2026
30% Flat Tax — Section 115BBH
Gains from transfer of any Virtual Digital Asset are taxed at a flat rate of 30% (plus applicable surcharge and 4% Health and Education Cess) under Section 115BBH of the Income Tax Act, effective from Financial Year 2022-23 (Assessment Year 2023-24) onwards.
- The 30% rate applies regardless of your income tax slab. Even if your total income falls in the nil-tax bracket, crypto gains are taxed at 30%.
- No deduction for expenses except cost of acquisition. Brokerage fees, transaction charges, and gas fees are generally not deductible.
- No set-off of losses: losses from one VDA cannot be set off against gains from another VDA. Crypto losses cannot be set off against any other head of income.
- No carry-forward of losses from VDA transactions to subsequent assessment years.
- Gifting a VDA triggers tax in the hands of the recipient if the fair market value exceeds ₹50,000.
1% TDS — Section 194S
A 1% Tax Deducted at Source applies on payments made on transfer of VDA, under Section 194S (effective 1 July 2022).
Thresholds under CBDT Circular 13/2022:
| Category | TDS Threshold (per FY) | Who qualifies |
|---|---|---|
| Specified persons | ₹50,000 | Individuals/HUFs not subject to tax audit; business turnover ≤ ₹1 crore or profession receipts ≤ ₹50 lakh |
| Other persons | ₹10,000 | Entities, individuals/HUFs required to get tax audit (higher turnover) |
The exchange or buyer deducts TDS and deposits it to the government. You can claim this TDS credit in your ITR through Form 26AS / AIS. TDS is a withholding mechanism, not the final tax — your actual liability is computed at 30% on net gain; TDS is credited against that liability.
Schedule VDA — Filing Requirement
From Assessment Year 2023-24, taxpayers with VDA income must complete Schedule VDA in their ITR. The schedule requires disclosure per transaction: date of acquisition, date of transfer, cost of acquisition, consideration received, and head of income. Omitting Schedule VDA where applicable can lead to scrutiny and penalties under Section 270A.
→ Learn how to invest in cryptocurrency in India — step-by-step guide
How to Report Crypto Tax in India
Step 1 — Determine the correct ITR form
- ITR-2: For individuals and HUFs with capital gains or VDA income, no business income from crypto.
- ITR-3: For individuals and HUFs with business income — applicable if your crypto activity is classified as business income rather than capital gains. The 30% Section 115BBH rate applies under either classification for VDA income.
Step 2 — Gather your transaction records
Download your complete trade history from every exchange you used during the financial year. Indian FIU-IND registered exchanges are required to provide detailed transaction histories. For overseas exchanges, you must self-report; maintain records of each trade — timestamp, pair, quantity, price in INR equivalent at time of trade.
Step 3 — Complete Schedule VDA
For each VDA transaction, enter: name of VDA (Bitcoin, Ether, etc.), date of acquisition, date of transfer, cost of acquisition in ₹, sale consideration in ₹, and gain/loss amount. Note that losses must still be reported even though they cannot be set off.
Step 4 — Verify TDS credit via Form 26AS and AIS
Log into the Income Tax portal (incometax.gov.in), navigate to "Annual Information Statement (AIS)" and "Form 26AS." TDS deducted by exchanges under Section 194S should appear here. If it does not, contact your exchange — discrepancies between AIS and your return can trigger automated notices.
Step 5 — Compute final tax liability
Total VDA gain × 30% + surcharge (if applicable) + 4% cess = gross tax. Subtract TDS already deducted. Pay the balance as Self-Assessment Tax (Challan 280) before filing.
Step 6 — Consult a Chartered Accountant (CA) for complex situations
Classification disputes (capital gains vs. business income), foreign exchange VDA transactions, crypto received as salary or mining income, and DeFi yield require professional judgment. The Income Tax Act's provisions as applied to DeFi and staking income lack clear CBDT guidance as of 2026 — a CA with crypto specialisation is advisable.
→ Is it safe to invest in cryptocurrency in India? Safety guide 2026
→ How to invest in Bitcoin in India — step-by-step guide 2026
← Back to the main cryptocurrency investment guide for India
Frequently Asked Questions
Is it legal to invest in cryptocurrency in India?
Yes, investing in cryptocurrency is legal in India for individual residents. There is no law prohibiting the purchase, holding, or sale of crypto. The Finance Act 2022 formally recognised Virtual Digital Assets (VDAs) under Section 2(47A) of the Income Tax Act. Compliant exchanges must be registered with FIU-IND under PMLA and operate legally in India.
What is the tax on crypto in India?
Gains from the transfer of cryptocurrency are taxed at a flat rate of 30% under Section 115BBH of the Income Tax Act, plus applicable surcharge and 4% Health and Education Cess. This rate applies regardless of income slab or holding period. No deduction for losses from VDA transactions is permitted under current law.
Do I need to pay TDS on crypto in India?
Yes. A 1% TDS applies on the transfer of Virtual Digital Assets under Section 194S (effective 1 July 2022). For specified persons (individuals not subject to tax audit with turnover up to ₹1 crore), TDS is deducted when annual transactions exceed ₹50,000. The exchange deducts TDS, and you claim the credit in your ITR.
How do I report crypto income in India?
Crypto income is reported using Schedule VDA in your Income Tax Return. Use ITR-2 for capital gains from crypto or ITR-3 if trading constitutes business income. Report each transaction with acquisition date, transfer date, cost, and sale consideration. Verify 1% TDS credits in your Annual Information Statement (AIS) on the Income Tax portal before filing.
Is Bitcoin legal in India?
Yes, Bitcoin is legal to buy, hold, and sell in India. It is classified as a Virtual Digital Asset under Section 2(47A) of the Income Tax Act 1961, as amended by the Finance Act 2022. Bitcoin is not legal tender, but there is no prohibition on ownership or trading. Gains from Bitcoin sales are subject to 30% tax under Section 115BBH.
Disclaimer: This guide is for general informational purposes only and does not constitute legal or financial advice. Please consult a qualified Chartered Accountant (CA) or legal advisor for advice specific to your situation. Crypto assets are high-risk and unregulated.
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